Environmental Engineering Reference
In-Depth Information
McNeely (1988, p. 39) has dei ned incentives as 'an inducement, which
is specii cally intended to incite or motivate governments, local people
and international organisations to conserve biological diversity'. The idea
behind economic incentives is to increase the cost of non-compliance with
environmental standards yet
allow the producer the l exibility to employ
the least-cost method of meeting these standards. By increasing the cost of
non-compliance the producer has a private incentive to meet the standards
set by the policy instrument. One of the advantages of incentive systems is
that they are seen by economists as a cost-ef ective alternative to inl exible
command and control environmental regulations (Hanley et al., 1997).
However, in practice subsidies are much more widely used because of the
resistance to other instruments by the agricultural sector (Hanley and
Spash, 1993).
Many incentives are based on the level of opportunity costs or
i nancial
costs
forgone by the producer. For example, the i nancial costs of conser-
vation as estimated by Willis and Benson (1988) in the United Kingdom
are of ered to farmers as compensation for not developing their land. This
is based on proi ts forgone under a management agreement. The current
i nancial cost is the dif erence between the value of the output (less inputs) of
the land under intensive management minus the value of output (less inputs)
under a conservation regime. A complete i nancial evaluation of conserva-
tion also needs to include administrative costs, legal fees, labour and mate-
rial costs for the maintenance of habitats (Willis and Benson, 1988).
Once the specii c costs to the producer are known, policy instruments
can be formulated that are targeted at the producer and that persuade
producers to achieve the desired environmental objectives. Typically,
agri-environmental policies employ market-based instruments such as
subsidies that create economic incentives that allow individual producers
to choose freely to adjust their activities thereby producing an environ-
mental improvement (Barbier et al., 1994). Taxes as opposed to subsidies
are generally preferred by economists because the latter inject income and
lead to expansion of the sector under consideration. Subsidies can attract
new entrants that may lead to greater aggregate levels of environmental
damage and to other market distortions (Hanley et al., 1997).
An example of such a broad appraisal is agri-environment policy used
to maintain ecologically important habitats such as the Environmentally
Sensitive Area (ESA) scheme in the United Kingdom. Specii c areas of
land providing habitats for valuable species are identii ed as conserva-
tion areas under which agricultural management practices are regulated.
Typically the policy is aimed at the farmer or forester to meet the desired
environmental objectives where, for example, farmers might be expected
to employ 'traditional' agronomic practices. The producer is then expected
